Global credit review

*Global Credit Review ended its publications in 2017.

GCR 2016, Volume 6

This sixth volume of the GCR begins with Default Econometrics and Default Application by Weimin Miao and Xuyuan Liu who study the role of corporate default and other exit events in default model estimation and document their empirical effects on applications. In the second article, the International Association of Credit Portfolio Managers (IACPM) conducts a survey on the evolution of credit portfolio management, which allows financial institutions to benchmark their own practices. This is followed by an article on Time-varying Rating Standards and the Distorted Incentives of Credit Rating by Tao Wang who examines the drivers behind time-varying and asymmetric rating standards practiced by rating agencies. Next are The Small and Medium Enterprises and their Credit Reporting System in China by Di Bu and Yin Liao who give their insights on financing difficulties faced by small and medium sized enterprises in China. We conclude this sixth volume of the GCR with an updated NUS-RMI Credit Research Initiative Technical Report, which offers technical details on the implementation of the current CRI corporate default prediction model and its performance. This updated technical report also includes a new section on the Corporate Vulnerability Index (CVI) and revision to how the haircut to other corporate liabilities, used in distance-to-default estimation, is determined. For a more elaborate discussion and update on the CRI default predictions produced thus far, readers are referred to our Quarterly Credit Reports.

GCR 2015, Volume 5

This fifth volume of the Global Credit Review begins with Risk Appetite Frameworks: Insights into Evolving Global Practices by the International Association of Credit Portfolio Managers (IACPM) and Price Waterhouse Coopers (PwC). They provide a study on industry practices and challenges of developing RAFs. In the second article, The Liquidity Regimes and the Prepayment Option of a Corporate Loan in the Finite Horizon Case, Timothee Papin and Gabriel Turinici propose a model incorporating liquidity regime-switching and the default risk of the obligor. This is followed by an article on Structural Market-Based Top-Down Stress Tests of the Banking System by Jorge Chan Lau from IMF to solve the difficulties in the absence of access to granular information of financial institutions while implementing stress testing. We continue with an article by Chih-Wei Lee and Cheng-Kun Kuo Examining the Validity of Credit Ratings Assigned to Credit Derivatives. Next are two reviews on George von Furstenberg’s book, “Contingent Convertibles [CoCos], a potent instrument for financial reform.” Jeffrey R. Bohn dissects the book from an industry perspective, while Jussi Keppo and Xuchuan Yuan give insights from an academic research angle. This is followed by an article on Eurozone Debt Crisis and Regulation of Credit Rating Agencies by Deena Zaidi. In the seventh article, Kuo-Wei Hsiao and Zhengyi Jiang review the literature on The Pre- and Post- Crisis Stress Testing in the Banking Sector. We conclude this fifth volume of the GCR with an updated NUS-RMI Credit Research Initiative Technical Report which offers technical details on the implementation of the current RMI-CRI corporate default prediction model and its performance. This report also includes a new credit risk measure, i.e., Actuarial Spread, implemented on the CRI system, and the new treatment for merges and acquisitions.

GCR 2014, Volume 4

This fourth volume of the Global Credit Review begins with An Assessment of Systemic Risk in the Japanese Banking Sector by Prof. Kanno Masayasu, which uses RMI-CRI PDs to measure the systemic risk in the Japanese banking sector. This is followed by the article Evolving Global Capital Regulations and its Impact, Particularly on Asia by Mr. Thomas Cho and Mr. Dexter Tan. In the third article Actuarial Par Spread and Empirical Pricing of CDS by Decomposition Prof. Jin-Chuan Duan proposes a measure similar to CDS spreads that summarizes the information embedded in the term structure of physical probabilities of default (PDs). This is followed by an article by Ms. Jenny Bai, Mr. Heikki Seppala and Prof. Ser-Huang Poon on Fast Approximation of Loan Portfolio Loss: Concentration Risk and Multifactor Adjustments. In the fifth article Rejection and Partial Rejection of Consumer Credit Application, Prof. Steven Plaut provides some new insights in the credit rationing and credit application process. Next is a joint article by IACMP and Oliver Wyman — Perspectives on the Evolving Role of Enterprise-wide stress testing. We conclude this fourth volume of the GCR with an updated NUS-RMI Credit Research Initiative Technical Report which offers technical details on the implementation of the current RMI-CRI corporate default prediction model and its performance.

Table of Contents

Global Credit Review, Message from the Editor

An Assessment of Systemic Risk - By Kanno Masayasu

Evolving Capital Regulations and its Impact, Particularly on Asia - By Thomas Cho and Dexter Tan

GCR 2013, Volume 3

This third volume of the Global Credit Review begins with a very topical article ‘Systemic Risk in Europe’ by Professors Eric Jondeau and Michael Rockinger. This is followed by the RMI article ‘Changes in the Ratings Game — An Update on Various Developments’. In the third article, ‘Reserve Requirements as Window Guidance in China’, Ms. Violaine Cousin provides insights into the effect of reserve requirements on bank asset quality in China. This is followed by an article by Dr. Markus Bingmer and Dr. Laura Auria on ‘The Implementation of the Basel II Default Definition by Credit Risk Assessment Systems: An Analysis of Possible Aggregation Procedures’. In the fifth article ‘Can Credit-Scoring Models Effectively Predict Microloans Default? Statistical Evidence from the Tunisian Microfinance Bank’, Ms. Ibtissem Baklouti and Prof. Abdelfettah Bouri present a credit-scoring framework for microfinance institutions. Next is a joint article by IACPM and KPMG — ‘Stepping Up to the Liquidity Challenge: The Changing Role of Credit Portfolio Management’. We conclude this third volume of the GCR with an updated ‘NUS-RMI Credit Research Initiative Technical Report’ which offers technical details on the implementation of the current RMI-CRI corporate default prediction model and its performance.

Table of Contents

Global Credit Review, Message from the Editor

Systemic Risk in Europe - By Eric Jondeau and Michael Rockinger

Changes in the Ratings Game - An Update on Various Developments - By RMI-CRI staff

Reserve Requirements as Window Guidance in China - By Violaine Cousin

The Implementation of the Basel II Default Definition by Credit Risk Assessment Systems: An Analysis of Possible Aggregation Procedures - By Markus Bingmer and Laura Auria

GCR 2012, Volume 2

The second volume of the Global Credit Review (GCR) begins with an opinion piece on ‘Credit Markets: Retrospect and Prospect’. The second article ‘An Improved Regulatory Framework for Credit Rating Agencies?’, provides a critical analysis of the most important attempts at CRA regulation that have recently been undertaken by authorities worldwide. This is followed by an article on ‘Stress Testing’. A fourth article, ‘Mega-Banks’ Self-Insurance with Cocos: A Work in Progress’, provides a framework for a more meaningful use of cocobonds. The volume continues with an article on ‘What are the Driving Factors behind the Rise of Spreads and CDS of Eurozone Sovereign Bonds?’. Next there is a review article on ‘Measuring Distance-to-Default for Financial and Non-Financial Firms’. This is followed by an updated ‘Technical Report for the RMI-CRI’, which offers technical details on implementation and performance of the current RMI-CRI corporate default prediction model. We conclude this second volume of the GCR with ‘A Lead-Lag Investigation of RMI-CRI PD and CRA Ratings’.

Table of Contents

Global Credit Review, Message from Editor

Credit Markets: Retrospect and Prospect - By David Rowe

An Improved Regulatory Framework for Credit Rating Agencies? - By James Weston

Stress Testing - By Noel D'Cruz and Davide Crippa

Mega-Banks Self-Insurance with Cocos: A Work in Progress - By George von Furstenberg

What are the Driving Factors behind the Rise of Spreads and CDS of Euro-Sovereign Bonds? - By Emmanuel Mamatzakis and Panos Remoundos

GCR 2011, Volume 1

The first volume of the Global Credit Review starts with an overview of the past, present and future challenges facing the credit rating industry. In a second article we highlight the most important attempts at CRA regulation that have recently been undertaken by authorities worldwide. We then proceed with an article on how to identify, measure, and manage the risk of credit rating downgrades. The volume further provides a review article on statistical credit rating methodologies since the 1960s. Lastly, we will elaborate on the RMI Credit Research Initiative with detailed technical information on implementation and performance.Table of Contents